Are you a gold investor who holds their gold with a bank in non-allocated storage? Did you know that the gold you leave in the bank may not be the gold you take out, or that your investment is technically on the bank’s books, meaning it could be claimed by creditors in the event of a bank failure or used in a bail-in if another financial crisis were to happen? If there’s any lesson that 2008 should teach investors, it’s that financial meltdowns are well within the realm of possibility, and that poses a risk to your physical gold if you’re not storing it the right way.
Is It Really Your Gold?
When your gold is held in a bank in non-allocated storage, your deposit is recorded, both quantity and type (i.e., bars, Maple Leaf coin, Kruggerand coin, etc.). However, it’s held with everyone else’s deposits as well, and when you want to withdraw your gold, you’re given the same quantity and type, but not the exact same gold you deposited. For many gold owners, that’s a non-starter; gold is a risk averse investment, and any storage solution that increases risks defeats the purpose.
How Gold Leasing Works
Banks lease out gold that they physically hold to “put it to work,” just as you wouldn’t want your money sitting in a savings account without really earning any interest. Companies in the gold industry, such as a gold mining company, will borrow gold to keep cash flowing. One great example is a gold mining company: let’s say it has one ton of gold out of the ground, but waiting to be refined. In order to pay its employees, the company will borrow one ton of gold and sell it, then deliver the gold it had in production to the bank. Interest rates on leased gold are often lower than interest rates on currencies, making it an appealing option for those in the gold market already.
The problem is that if you store your gold in a non-allocated account, it’s on a bank’s balance book. They can lease it out, and if the bank hits financial trouble, creditors can claim it to satisfy the bank’s debts – even though it’s yours. In other words, you don’t own gold unless you have it in your own home or in allocated storage with a gold dealer like Silver Gold Bull.
When you find allocated storage for your gold, you’re given a Certificate of Allocation, a guarantee of 100% ownership and the freedom to take delivery of your gold at any time. For small amounts of gold, the most convenient way to keep easy access to your gold is likely a home safe, as well as discretion; don’t tell people you have it. Gold dealers like Silver Gold Bull, one of the biggest online gold dealers in Canada, offer global allocated storage solutions. It’s completely insured and stored in the proper conditions for gold – which can be damaged if you store it improperly. If you’re worried home security isn’t enough, visit Silver Gold Bull to learn more about their allocated gold storage solutions. Your gold is kept separate from others and the gold you put in is the exact item you receive when you decide to take delivery. If you want to minimize risks to your investment, allocated storage is the only solution for you.